What to do about Detroit.(sethgodin.typepad.com)
sethgodin.typepad.com
What to do about Detroit.
http://sethgodin.typepad.com/seths_blog/2008/11/what-to-do-abou.html
10 comments
Good points, but one of the forces skewing industries toward large players is the large players themselves. They have an economy of scale to lobby new regulations. Removing some of the hundred-million safety regulations might just open the way to innovations that will improve safety.
I just looked at some statistics - I know it's damn lies but - it seems traffic deaths per mile travelled were falling both before and after the US introduced car safety regulations, but before the regulations they were falling faster. Also Wikipedia says the mandating of airbags was controversial because their cost/benefit ratio is extremely high for a safety device. Hope someone more knowledgeable corrects me.
I just looked at some statistics - I know it's damn lies but - it seems traffic deaths per mile travelled were falling both before and after the US introduced car safety regulations, but before the regulations they were falling faster. Also Wikipedia says the mandating of airbags was controversial because their cost/benefit ratio is extremely high for a safety device. Hope someone more knowledgeable corrects me.
Exactly, and he seemed to limit his scope of car companies to American car companies. Since the Auto Industry is global one the number is much higher. And just because you have a lot of players in a market doesn't mean all of them are going to be innovative it just means there will be generally more innovation.
So, Tesla Motors spent hundreds of millions of dollars just on safety regulations for the Roadster? I don't buy it.
"I'd spend a billion dollars to make the creation of a car company turnkey. Make it easy to get all the safety and regulatory approvals... as easy to start a car company as it is to start a web company."
If it is ever as easy to start a car company as it is to start a Web company, then something is wrong. People can't drive their browsers into each other at 100MPH.
Also, there is no problem with the idea of big car companies. Big companies have increasing economies of scale and can offer significant savings to consumers. A poorly-run big company is a problem, not the size of the company itself.
If it is ever as easy to start a car company as it is to start a Web company, then something is wrong. People can't drive their browsers into each other at 100MPH.
Also, there is no problem with the idea of big car companies. Big companies have increasing economies of scale and can offer significant savings to consumers. A poorly-run big company is a problem, not the size of the company itself.
And this is why hackers should not make comments on mechanical and electrical engineering. Especially web hackers - who have absolutely no regulatory (nor moral, usually) concerns when it comes to the safety and reliability of their products.
I consider myself a hacker, but I am a mechanical engineer by training. I've worked in car plants, and I think I'm much more uniquely qualified to speak on this subject than the blog author.
People do not comprehend the kind of cash that a car company needs (and should need) to get into the market. Let me detail the process of producing your car's radiator motor (just the motor!):
- Come up with your awesome motor design (doesn't cost a lot, assuming you and your fellow startup partners are good engineers)
- Draft your designs (draftsmen around here are unionized, and paid a great deal for their work)
- Build a proof of concept. In fact, build several (requires access to a very extensive machine shop, and unless your founders are all exceptionally talented machinists, you have to pay unionized labour more money to get this done)
- Now build several hundred more prototypes. These will go through performance and reliability testing. This will require access to heat testing chambers, sound testing labs, strength testing machinery... you name it. Each of these labs can't really be rented, and cost tens of millions to build and staff. Each piece of equipment needs to be certified by the relevant safety and regulatory body ($$$), and you'll need several people on board full time just to document everything to the minutae required by the same bodies ($$$). Do you know how much a certified laser micrometer costs?
And that's just to get your first working prototype. You're already probably 8-digits invested by this point, and you haven't even yet built out the necessary infrastructure to mass produce your product. By the way, casting a mould for a single part (e.g. your motor casing) costs $200-300K by itself, so moving towards production is not cheap either.
Now multiply that by the tens of thousands of parts in your car.
People (especially software types) simply do not appreciate the sheer, ridiculous amount of effort (and money) it takes to keep them safe. This is also why I'm always wary of cheap goods, because I have seen first hand the difference between well-designed, properly tested products vs. not.
The car industry can never move back towards a tiny-startup model. Sure, there may be room for smaller players, but "thousands of startups" like the web model will never fly, unless you enjoy having your wheels fly off the axle as you drive.
I consider myself a hacker, but I am a mechanical engineer by training. I've worked in car plants, and I think I'm much more uniquely qualified to speak on this subject than the blog author.
People do not comprehend the kind of cash that a car company needs (and should need) to get into the market. Let me detail the process of producing your car's radiator motor (just the motor!):
- Come up with your awesome motor design (doesn't cost a lot, assuming you and your fellow startup partners are good engineers)
- Draft your designs (draftsmen around here are unionized, and paid a great deal for their work)
- Build a proof of concept. In fact, build several (requires access to a very extensive machine shop, and unless your founders are all exceptionally talented machinists, you have to pay unionized labour more money to get this done)
- Now build several hundred more prototypes. These will go through performance and reliability testing. This will require access to heat testing chambers, sound testing labs, strength testing machinery... you name it. Each of these labs can't really be rented, and cost tens of millions to build and staff. Each piece of equipment needs to be certified by the relevant safety and regulatory body ($$$), and you'll need several people on board full time just to document everything to the minutae required by the same bodies ($$$). Do you know how much a certified laser micrometer costs?
And that's just to get your first working prototype. You're already probably 8-digits invested by this point, and you haven't even yet built out the necessary infrastructure to mass produce your product. By the way, casting a mould for a single part (e.g. your motor casing) costs $200-300K by itself, so moving towards production is not cheap either.
Now multiply that by the tens of thousands of parts in your car.
People (especially software types) simply do not appreciate the sheer, ridiculous amount of effort (and money) it takes to keep them safe. This is also why I'm always wary of cheap goods, because I have seen first hand the difference between well-designed, properly tested products vs. not.
The car industry can never move back towards a tiny-startup model. Sure, there may be room for smaller players, but "thousands of startups" like the web model will never fly, unless you enjoy having your wheels fly off the axle as you drive.
I'm not disagreeing with you, but what about F1. F1 is the most expensive form of motorsport, yet every year, every team builds a completely new chassis, and models to compete in the next season. F1 cars have to go through destructive crash testing too. It costs anywhere from $60M to $400M a year to run an F1 team. They are building highly complex machines with carbon fiber and exotic metals. If they can do it efficiently on smaller budgets (look at the smaller teams especially, Force India, Williams, Scaudro Toro Rosso, Super Aguri), how different would it be to build a car prototype out of metal using conventional construction?
The main differences are that:
- A 1% failure rate on an F1 car may in fact be considered acceptable, but completely insane in a production car that may sell millions of units a year. F1 drivers, despite all that we can do, also accept a much higher level of personal risk than most other everyday drives.
- F1 cars only have to worry about a single passenger, and due to the controlled nature of the race a more limited number of failure modes... which is to say the scope size of the problem is significantly reduced - and designing for F1 is already non-trivial!
- Carbon fiber is almost impossible to work with on a mass production basis - the nature of the material prevents high-precision parts from being made, which is hell on a production line, but easier when you're hand-building everything
And you're right - it's entirely possible for a limited-size team to build a car from scratch - assuming they had all the parts as it is. It's entirely impossible for them to attempt to build the drive train, engine, all panels, structural parts, suspension, etc etc, from scratch. It's also very difficult for them to afford the sort of testing required to get this car to market.
- A 1% failure rate on an F1 car may in fact be considered acceptable, but completely insane in a production car that may sell millions of units a year. F1 drivers, despite all that we can do, also accept a much higher level of personal risk than most other everyday drives.
- F1 cars only have to worry about a single passenger, and due to the controlled nature of the race a more limited number of failure modes... which is to say the scope size of the problem is significantly reduced - and designing for F1 is already non-trivial!
- Carbon fiber is almost impossible to work with on a mass production basis - the nature of the material prevents high-precision parts from being made, which is hell on a production line, but easier when you're hand-building everything
And you're right - it's entirely possible for a limited-size team to build a car from scratch - assuming they had all the parts as it is. It's entirely impossible for them to attempt to build the drive train, engine, all panels, structural parts, suspension, etc etc, from scratch. It's also very difficult for them to afford the sort of testing required to get this car to market.
Seth Godin is not a hacker.
Great comment.
People (especially software types) simply do not appreciate the sheer, ridiculous amount of effort (and money) it takes to keep them safe. This is also why I'm always wary of cheap goods, because I have seen first hand the difference between well-designed, properly tested products vs. not.
What car do you drive?
People (especially software types) simply do not appreciate the sheer, ridiculous amount of effort (and money) it takes to keep them safe. This is also why I'm always wary of cheap goods, because I have seen first hand the difference between well-designed, properly tested products vs. not.
What car do you drive?
I actually don't drive :) But based on my experience in that car plant, here are some pointers, just IMHO:
- Avoid Pontiacs at all costs. The quality difference between, say, a Sunfire and a Chevy Cobalt is ridiculous. Even "higher end" cars like the G6 are somewhat questionable. Chrysler are built cheap. The radiator motor that I worked on while I was there was timed to stop working after about 4-5 years (brushes in the motor will wear out).
- Avoid anything built in Mexico. This is not a knock against Mexicans, but my company's Mexican plant was completely devoid of precision manufacturing. Where an American plant would laser-guide parts into their fittings, in Mexico they're literally eyeballed (and malleted!). A full 80+ percent of warranty returns were due to parts built in Mexico.
- The high-end Chryslers are actually pretty good in terms of quality, and when I was working there the Ford Fusion was still under development - and based on what I saw (of the radiator design) Ford seemed like they were willing to pay for good parts. A good sign I suppose.
- Nothing beats Mercedes and BMW in quality. You do get something for your money, regardless of what people might say. Whether the cost per unit-quality is low enough for you is your own decision though :) Where GM was running brush motors, BMW runs entirely brushless (e.g. theoretically infinite lifetime, will run as long as your solid state electronics and assemblies hold together), and they're powerful to boot.
- Avoid Pontiacs at all costs. The quality difference between, say, a Sunfire and a Chevy Cobalt is ridiculous. Even "higher end" cars like the G6 are somewhat questionable. Chrysler are built cheap. The radiator motor that I worked on while I was there was timed to stop working after about 4-5 years (brushes in the motor will wear out).
- Avoid anything built in Mexico. This is not a knock against Mexicans, but my company's Mexican plant was completely devoid of precision manufacturing. Where an American plant would laser-guide parts into their fittings, in Mexico they're literally eyeballed (and malleted!). A full 80+ percent of warranty returns were due to parts built in Mexico.
- The high-end Chryslers are actually pretty good in terms of quality, and when I was working there the Ford Fusion was still under development - and based on what I saw (of the radiator design) Ford seemed like they were willing to pay for good parts. A good sign I suppose.
- Nothing beats Mercedes and BMW in quality. You do get something for your money, regardless of what people might say. Whether the cost per unit-quality is low enough for you is your own decision though :) Where GM was running brush motors, BMW runs entirely brushless (e.g. theoretically infinite lifetime, will run as long as your solid state electronics and assemblies hold together), and they're powerful to boot.
What about Toyota, Honda, or Mazda? Volkswagon/Audi? I'm just wondering. Are you basing your entire assessment on these brush motors?
The plant I was at also manufactured HVAC and power steering motors - I'm basing my assessment of them not only on the reliability of these products, but also the pricing structures the companies were demanding from us (e.g. a company that wants a $15 radiator is probably not out to create a very good car).
The plant didn't make anything for Toyota, Honda, or Mazda at the time, so I can't comment on those.
The plant didn't make anything for Toyota, Honda, or Mazda at the time, so I can't comment on those.
By radiator motor did you mean electric radiator fan.
Were you the engineer who designed radiator shrouds, fans, and motors?
Were you the engineer who designed radiator shrouds, fans, and motors?
Yes, I was a junior at the plant at the time - I handled heat cycle, noise, and airflow testing on shrouds, fans, and motors, as well as building (which, being that the plant is unionized, really just meant collecting parts and hounding the shops people) prototype parts for clients.
Good post, but what is a "radiator motor?" Do you mean simply the engine?
Your engine produces a massive amount of heat that must be vented. Your car pulls/pushes a large amount of air (using a motor + fan) through the front (or sometimes bottom, or sides) of your car through an array of metal fins that helps dissipate the heat.
Thanks. I didn't know if you meant the fan-- I hadn't heard it called that. I got "water pump" stuck in my head...
[of course, the fans used to be driven by a belt from the engine ...]
[of course, the fans used to be driven by a belt from the engine ...]
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He is right about the effect all those regulations have on innovation. I remember too, about 10 years ago talking with some programmers from a major car company, they had to fill out 17 pages of documentation in order to change a few lines of code in their system.
And this is precisely the way it should be. Everything when it comes to cars has to be meticulously documented.
You reduce the diameter of that bolt by 0.01", thinking it'll save the company some money, and be strong enough to do its job, and somebody will later come, assuming the bolts weren't changed, and put more load on it. And then one will snap, resulting in a horrific crash that kills everyone in the car. And then the company gets sued, and pays out millions in compensation, not to mention the guilt of having shoddy engineering kill someone.
Code is no less capable of killing innocent people.
You might think that this sort of bureaucracy stifles innovation, or reduces your productivity - but the fact of the matter is that it saves lives, not to mention documents proper liability, etc etc.
You reduce the diameter of that bolt by 0.01", thinking it'll save the company some money, and be strong enough to do its job, and somebody will later come, assuming the bolts weren't changed, and put more load on it. And then one will snap, resulting in a horrific crash that kills everyone in the car. And then the company gets sued, and pays out millions in compensation, not to mention the guilt of having shoddy engineering kill someone.
Code is no less capable of killing innocent people.
You might think that this sort of bureaucracy stifles innovation, or reduces your productivity - but the fact of the matter is that it saves lives, not to mention documents proper liability, etc etc.
I would like to see a cost/benefit study of such onerous regulation. "It saves lives" is a cop out justification the same way "for the children" is. Costs. Benefits. Calculate you some, or get out of the way.
It so true though, that it bears nearly continuous repeating. As a society, we have to make a choice. How many fatalities are we willing to accept per million vehicle miles? The answer can't be zero unless we want no cars at all. The onerous regulations are how we as a society choose that number. Are the regulation always efficient? No. But they are how we choose.
Its also important to remember that other counties and peoples with different world views will have radically different conceptions as to what this acceptable number is.
Its also important to remember that other counties and peoples with different world views will have radically different conceptions as to what this acceptable number is.
Ok, I'm out of the way. Catch you later.
http://en.wikipedia.org/wiki/Tacoma_Narrows_Bridge http://www.airlinesafety.com/faq/faq9.htm
http://en.wikipedia.org/wiki/Tacoma_Narrows_Bridge http://www.airlinesafety.com/faq/faq9.htm
This was not software for cars (I should have been more specific). It was accounting or ERP software of some kind.
When you have a bug in your code it is unlikely to lead to real people dying; this is a distinct possibility for code that helps control multi-ton pieces of metal bombing around at a mile a minute run by poorly trained operators over incredibly varied conditions and terrain. In systems control software the key to reducing defects is having a good process and sticking to it without exception.
If you have thousands of cars from hundreds of car companies your local garage will have parts for a dozen of them.
There are products which lend themselves to 'the long tail'. The repeated failure of niche brands like DeLorean and Bricklin may indicate that cars are not among them.
There are products which lend themselves to 'the long tail'. The repeated failure of niche brands like DeLorean and Bricklin may indicate that cars are not among them.
I agree completely! Spend money encouraging innovation and solving tomorrows problems, not keeping the existing oligarchies on life support. Congress should be considering investments and negotiating term sheets like VCs (but they won't).
Wrong. Congress shouldn't be investing at all. Seriously, the returns when congress invests and when private investors invest are so drastically far apart that I am continuously left wondering how congress can convince voters to let it continue.
Well, there is one way around that; let congress invest in VC's with historically high returns, but don't let them place the onerous restrictions on the money that usually surrounds public funds (labor laws, oversight, documentation through the ying-yang), instead merely restricting to an area of investment.
The problem with historically high returns is the usual past performance no is no guarantee blah, blah, blah...
And when VCs get flush with cash they just seem to fund dumb stuff on a grander scale: http://web.archive.org/web/20000510152036/http://www.pixelon... Too random a process to predict or control.
And when VCs get flush with cash they just seem to fund dumb stuff on a grander scale: http://web.archive.org/web/20000510152036/http://www.pixelon... Too random a process to predict or control.
Better option: Reduce taxes so that money can be invested by the people who earned it. Radical huh.
You'd also have to reduce qualified investor laws.
And honestly, reducing taxes even further in this crises doesn't strike me as a reasonable way to handle a global credit crunch...
And honestly, reducing taxes even further in this crises doesn't strike me as a reasonable way to handle a global credit crunch...
You don't need to be a qualified investor to invest in the general economy. Banks, mutual funds, and a dozen other easily accessible instruments willingly do that for you.
As for reduced taxes, I would argue that it seems like the ideal way to combat a global credit crunch. The government has the lowest cost of capital and the lowest default rate (at least the US govt. does). Thus it would be more efficient to leave the extra capital with private citizens and use deficit spending. Of course it would even more efficient to just not have the federal govt. spend as much but then its not like hell is about to freeze over anytime soon.
As for reduced taxes, I would argue that it seems like the ideal way to combat a global credit crunch. The government has the lowest cost of capital and the lowest default rate (at least the US govt. does). Thus it would be more efficient to leave the extra capital with private citizens and use deficit spending. Of course it would even more efficient to just not have the federal govt. spend as much but then its not like hell is about to freeze over anytime soon.
I know Seth Godin often gets bashed on HN for lack of insight, but I think this post is surprisingly insightful.
Insightful to the layman, but to any (traditional) engineer worth his salt it's just crazy talk.
I consider myself a traditional engineer, at least a traditional 21st century engineer... by insightful, I meant the "food for thought" insightful.
Gee, we're sure fortunate to have the sage Mr. Godin to lead us in this fog of uncertainty. His decades of experience in marketing will surely guide us through this industrial misfortune.
Opinions are like assholes...no, right now opinions about the economy are like assholes...
Opinions are like assholes...no, right now opinions about the economy are like assholes...
Whether or not he knows what he's talking about, he didn't mention the other advantage of having a more diversified gallery of manufacturers: none of them would be "too big to fail". Yeah, there's economy of scale, but that has to be weighed against putting all our (collective economy's) eggs in a few baskets.
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uhm. is he saying he wants to buy a car that's surprisingly innovative with its heated wing mirrors but lacks another company's life saving side collision impact distribution lattice?
these 1000 car companies all made innovations that COLLECTIVELY would make 1 decent car. why the hell would you want to buy a car with 1 or 2 of these critical features? eventually as a market settles, desirable features are consolidated, it's the reason why we don't have 1000 companies making PC operating systems and browsers...
these 1000 car companies all made innovations that COLLECTIVELY would make 1 decent car. why the hell would you want to buy a car with 1 or 2 of these critical features? eventually as a market settles, desirable features are consolidated, it's the reason why we don't have 1000 companies making PC operating systems and browsers...
You might not, but maybe some people would. That's where innovation comes in: finding a mix of features so people choose what is important to them at different price points. What doesn't work doesn't sell, and then back to the drawing board. Many people drive motorcycles, after all.
What would be interesting would be if alt-energy cars were classified as a different type of motor vehicle, with a relaxed set of regulations. This would allow for new companies to make them, and for established companies to make them cheaper. Then after the market is established, and many companies have innovated in the industry, then slowly ratchet up the regulations on them. Just a thought.
What would be interesting would be if alt-energy cars were classified as a different type of motor vehicle, with a relaxed set of regulations. This would allow for new companies to make them, and for established companies to make them cheaper. Then after the market is established, and many companies have innovated in the industry, then slowly ratchet up the regulations on them. Just a thought.
it just seems to me that he's trying to re-evolution something that has already evolved.
i'm just saying, evolving further is more attractive than declaring this lineage a failure and going back to knuckledragging. it feels like when these a-hole anarchists think society would be better off if everyone had to defend their property with shotguns instead of having the system of law enforcement and crime-science we have now.
i'm just saying, evolving further is more attractive than declaring this lineage a failure and going back to knuckledragging. it feels like when these a-hole anarchists think society would be better off if everyone had to defend their property with shotguns instead of having the system of law enforcement and crime-science we have now.
I was in Detroit last week... I have family there. I also drive a car. And I would rather that the world doesn't melt and the economy thrive. So I'm uniquely qualified to weigh in on the automobile industry.
Which would make me uniquely qualified to weigh in on the intricasies of modern farming since I have family that lives on a farm, went there last week and use dairy products on a regular basis.
On a more serious note, there are some basic economic insights that Seth seems to have completely missed: Some industries are skewed towards a scattered market with a lot of small players. Others are skewed toward a few large players. One of the main factors involved in this is fixed cost vs. variable cost. The automative industry has enormous fixed costs that it has to incur before it has a product that is ready to sell. This is true even if there are suppliers that can deliver most of the parts. Safety regulations alone costs hundreds of million for each model. This fixed cost has to be spread out across however many cars you sell. This is why some industries, such as the automative, semiconductor and aeronautics industries, have a few large players. If you only sell 1000 cars your fixed cost would be a prohibitively high percentage of the final price of the car. So there are a few large players because there are significant advantages to economies of scale.
Other industries, like carpenting, consulting and software don't have high fixed costs before they can go out and sell a product. Which is why there are a lot of small players in these markets.
Seth should stick to marketing.